How to Choose the Right Credit Card Processing Company

Transcription

1 How to Choose the Right Credit Card Processing Company

2 How To Choose The Right Credit Card Processing Company If you're in business these days, you need to accept credit cards. The problem is, which type of credit card processing should you choose? And how do you know which processors are worth using? In this guide, we'll break down what you need to ask, what you can negotiate, and what you'll find in your contract. Questions to Ask Applying for a merchant account to process credit cards is ironically quite similar to applying for your first credit card. The key thing to understand is that your personal creditworthiness is not really the issue. It's your business' creditworthiness, and how you're seen as a risk. If you're a start-up in a risky area, you can expect the process to take longer than a convenience store in a high-traffic area. Nonetheless, it's important to remember that you're going into business with them just like they're going into business with you. You need to ask questions and get serious answers. Regardless of your type of business, here are a few key questions to ask. What is your fee structure? Don't be shy about asking: what's this going to cost you, per swipe? Don't accept anything vague: The salesperson on the other end of the line has hard numbers and can share them with you. Make sure you get as specific as possible on this, but remember that everything can be negotiated, and nothing is concrete until it's on paper. Will I be seen as a high-risk business to your company, and if so, what terms can I expect? High-risk businesses are essentially treated much like people with a bad credit score. You may have to put down a reserve, pay higher rates, or both, since you're at much higher risk of not paying your bills. So, get a straight answer up front. Most won't be able to answer it without a credit check, but can give you a ballpark estimate based on type of business, length of time open, and other factors. How many references do you need? To open a merchant account, many processors ask for five credit references, or even more. Ask what they're looking for in references and who you should send over to them. What equipment works best with your network? Many payment networks work better with certain types of terminals. If you're buying equipment, ask them about the details and cost of the total system. What encryption and security does your network offer for my transactions? This is especially important for online transactions, where the card is not physically there and the data is transmitted over phone lines. How safe is both your information and the information of your How to Choose the Right Credit Card Processing Company 2012 Business.com Media, Inc

3 customers? After all, if there's a breach and their credit card is stolen, customers are not going to go to your processing network. They're going to come to you. What can I expect from your merchant services? You should also research this one on your own, but it never hurts to look through the perks you can expect if you go into business with this company. Can you give me some references? Yes, you can check their references too. In fact, you need to. So ask them to point you towards customers with similar businesses, so you can speak with them about the service. Remember: Shop around. Compare and contrast providers, and don't be shy about mentioning what others have told you. Analyzing the Numbers Once you've narrowed it down to a few companies, it's time to get a sense of the fees and what each processor will cost you. Here are the most common fees for merchants: Application Fee: Yes, some request a fee to apply for their services. And yes, it's negotiable. Interchange or "Swipe" Fees: This is the most basic fee, the fee on which all others are built. Each time you process a credit card, you're charged a flat fee and a certain percentage of the transaction. This is usually a small amount, around 2-3%. There's good news and bad news here. The good news is that for debit cards, swipe fees have been capped by the federal government. You will pay an absolute maximum of 24 cents a swipe for debit cards. Credit cards, unfortunately, have no such protection. This doesn't mean, however, that you don't have negotiating room with both. This is especially true if you have a high volume of swipes. If you've got the potential to generate thousands of dollars a month for a company, they're going to work with you in order to make the numbers make sense for your business. See if you can haggle down both the flat fee and the percentage, but anything you can shave off the top means more money for your business later. Also remember that many processors offer discounts for transactions where the card is physically present. Similarly, don't forget to crunch the numbers once you have a possible percentage and flat fee. Run those fees through your previous business numbers and get a sense of exactly what you'll be paying out and whether that's acceptable to you. How to Choose the Right Credit Card Processing Company 2012 Business.com Media, Inc

4 Pass-Through Fee: This fee is charged when a transaction, for whatever reason, doesn't meet certain requirements of the processor. Generally, this is over verifying certain types of data. Pass-through fees are usually charged on "risky" transactions where there's a higher chance of triggering a chargeback. This fee is absolutely negotiable; in fact, if the processor won't budge on this fee, walk away. They're likely not budging on it because they intend to charge you that fee quite often. Monthly Minimum Fee: Yes, in addition to paying swipe fees, you will also be expected to pay a monthly fee to your processor. Once again, this is negotiable. In fact, if you have an extremely high swipe volume, it's possible to make it go away altogether. Play hardball with this fee, if you can. Customer Service Fee: Some processors will charge a customer service fee, either as a blanket ongoing part of doing business with you, or on a per-use basis. Again, here's where playing hardball can pay off; see if you can get customer service included with your monthly minimum fee, free customer service, or any other sort of discount. After all, you're the customer here. Why should you pay if you're calling over something going wrong? Programming Fees: These are generally charged if, for example, you'd like your receipt to feature a specific message or you'd like to participate in loyalty rewards programs also handled by the processor. Many of these can be avoided just by not signing up for the program, but be sure to ask about them. Chargeback Fee: This fee may not involve you, but it's important to understand. A chargeback fee is what the credit card processor pays in order to process a refund. If you start racking up these fees, they're going to make their displeasure known extremely swiftly. Once you get a sense of the fees and what you'll be getting, choose a merchant and get a lawyer, because it's time to sign the contract. Contract Terms and Fees There are two things to remember: Look over the contract with a lawyer, and nothing is set in stone until you sign the contract. First of all, any reputable processor will be delighted that a lawyer is looking over your contract. It reduces complaints and it makes sure that everybody has a thorough understanding of the business arrangement. Needless to say, any processor that tries to discourage you from having a lawyer look at the contract is a processor you want to avoid. Examine the contract line by line with your attorney. Look at each fee closely as it's detailed in the contract, and keep a special eye out for fees that may not have been discussed. Just like a normal credit card, there may be rate raises in the contract depending on the processor and certain criteria that you How to Choose the Right Credit Card Processing Company 2012 Business.com Media, Inc

5 may have to meet. There may be obscure fees that you think you're unlikely to trigger, but need to know about. With some of these fees, ask that they be struck from the contract. You may get a refusal, but it never hurts to ask. If you're not clear on anything in the contract, or something seems ambiguous, don't hesitate to ask for clarification. And if you don't like the terms of a certain part of the contract, ask for the terms to be changed. Remember, this is a business arrangement between yourself and the processor, and needs to be treated accordingly. Once the contract is signed, you're obligated to abide by it. So anything that bothers you needs to be removed now. It can be a long road to finding a good credit card processing company, but once you do, it will mean a lot for your business. Just ask questions and negotiate, and you'll find a company that works for you. If you're looking for a low-cost credit card processing solution for your own business, check out Business.com's Credit Card Processing section, where you'll find a comparison of top vendors, as well as additional tips and advice: How to Choose the Right Credit Card Processing Company 2012 Business.com Media, Inc